On November 27, 2025, the UK government is poised to unveil sweeping changes to its approach on oil and gas drilling in the North Sea, signaling a significant shift in the country’s energy policy. According to BBC, Chancellor Rachel Reeves will present the new North Sea Strategy as a key component of her Budget speech, with the Department for Energy Security and Net Zero expected to release a detailed document shortly after. This move marks a notable pivot for the Labour government, which has faced mounting pressure from both industry leaders and local communities grappling with the economic realities of a declining sector.
The cornerstone of the new strategy is a relaxation of restrictions that have, until now, limited new drilling projects in the North Sea. The government plans to allow new drilling by permitting so-called "tie backs"—projects where new extraction areas are connected to existing infrastructure. This approach, first floated at the Labour conference in September, is designed to streamline approval for new developments by framing them as extensions to already-operating fields.
Historically, tie backs have been used for modest, remote additions to existing oil and gas fields, particularly when those fields geologically extend into unlicensed areas of the seabed. The idea is simple: if you can connect a new pocket of oil or gas to an existing platform, you can bring it online faster and with less environmental disruption than building entirely new facilities. However, the current relaxation is expected to go further, potentially opening the door for much larger projects to benefit from the same regulatory leniency.
One project looming large over the debate is the controversial Rosebank oil field. While the North Sea review will not directly reference Rosebank—since it remains subject to a separate regulatory and judicial process—industry insiders and environmental groups alike believe the new rules could increase its chances of eventual approval. Rosebank is no ordinary tie back; it’s a massive facility requiring its own production infrastructure, making it a litmus test for how far the government is willing to stretch the definition of a tie back.
For months, the oil and gas industry has been lobbying hard for a friendlier regulatory and fiscal environment. Their main target: the windfall tax, officially known as the energy profits levy, which currently stands at a hefty 78% and is scheduled to expire in 2030. Industry executives argue that the windfall tax, introduced in the wake of soaring oil prices after the Russian invasion of Ukraine in 2022, has outlived its purpose. As oil prices have since dropped, they say, the rationale for punitive taxation has evaporated.
“Subsequent falls in the price of crude oil demonstrate that the ‘windfall’ has now ended and that taxation should reflect that change,” industry representatives have argued, according to BBC. The sector contends that the current tax regime is not just squeezing profits but actively driving investment away from the North Sea. Operators, faced with slim margins and uncertain returns, are increasingly choosing to invest in other regions with more favorable tax rates.
The numbers paint a stark picture. Research from Robert Gordon University in Aberdeen estimates that about 1,000 jobs per month are currently being lost in the UK’s oil and gas sector. This steady bleed of skilled workers and the knock-on effects for local economies have added urgency to calls for reform. Investment, once the lifeblood of the North Sea’s energy industry, is now at an all-time low.
The government appears to be listening. While there is no official confirmation yet, speculation is rife that the windfall tax could be phased out earlier than planned. One mechanism reportedly under consideration is a "cap and floor" system, which would adjust taxation in response to swings in global oil prices. If prices spike, as they did after Russia’s invasion of Ukraine, the cap would kick in to ensure the public still benefits from extraordinary profits. But if prices fall, the floor would prevent taxation from becoming overly punitive.
This balancing act is not just about economics; it’s about politics, too. The Labour government must walk a tightrope between its green ambitions—many of which were articulated in opposition by figures like Ed Miliband, who was vocally against projects like Rosebank—and the immediate needs of workers and communities dependent on the oil and gas sector. The strategy’s focus on tie backs is, in effect, an attempt to square this circle: allowing new development while maintaining a veneer of continuity with existing infrastructure and, by extension, existing environmental safeguards.
Yet, not everyone is convinced. Environmental groups have warned that even limited new drilling risks undermining the UK’s climate commitments, especially as the country strives to meet its net zero targets. The government, for its part, is keen to stress that the new rules do not represent a carte blanche for unchecked expansion. Each project, officials insist, will still be subject to rigorous regulatory scrutiny.
At the same time, the government’s decision not to directly address the fate of the Rosebank field in the North Sea review has raised eyebrows. For some, it’s a pragmatic move—Rosebank is, after all, embroiled in its own regulatory and judicial process. For others, it’s a sign that the government wants to keep its options open, avoiding a high-profile confrontation at a time when the industry is already in turmoil.
Regardless of where one stands on the issue, the stakes are high. The North Sea has long been a cornerstone of the UK’s energy system and a vital source of jobs and revenue. But with the sector facing unprecedented challenges—from global price volatility to the inexorable march toward renewable energy—the choices made now will reverberate for years to come.
As Chancellor Reeves steps up to the dispatch box to deliver her Budget speech, all eyes will be on the details of the North Sea Strategy. Will the government’s new approach breathe life back into a struggling industry, or will it simply delay the inevitable transition to a post-fossil fuel future? Either way, the decisions announced this week will shape the next chapter of the North Sea—and the communities that depend on it.
With economic pressures mounting and political fault lines exposed, the government’s North Sea Strategy is set to become a defining issue—not just for the energy sector, but for the country as a whole.
